Still trying to forge the right channel strategy to compete better with its rivals’ aggressive direct sales models, Compaq Computer Corp has culled the number of partners which distribute its business products from 39 to four. They are: Inacom, Ingram Micro, Merisel and TechData. From August 1 the other 35 companies – such as MicroAge Inc’s Pinacor – will place their BTO build-to- order requests with one of these four.
Each of the four will be co-located at Compaq in Houston, Texas, providing call center functions, assembly and configuration of third party products. Compaq says it will mean it can fulfill business customer orders within 48 to 72 hours and cut its inventory in half because it will only need to ship product to 30 sites instead of 100. Compaq says that the vast majority of business products are already ordered through these four companies. It says the four have better core competencies in some areas then it does does and stock up to 100,000 third party products.
In a year, Compaq has cut inventory turns to four weeks from more than ten, but has at the same time created a complex logistical headache with the number of channel programs it has created to try to strike the right balance between selling direct and through partners. If 25% of sales are direct then 75% will be fulfilled by these channel partners, Compaq says.
Under the new North American Distributor Alliance Program, the four distributors – plus CompuCom, which Compaq already uses to fulfill corporate orders – will be responsible for configuring, assembling and shipping BTO build-to-order Deskpro PCs, Armada notebooks, Proliant NT servers, Prosignias and workstations. The current distribution channel for configure-to-order servers, storage, and Persario consumer PCs remains unchanged.
Compaq says PCs and notebooks will get to customers within 3 days, servers and other products within seven days. The new distribution strategy, struck with chairman and co-founder Ben Rosen holding the reins and making decisions until a new CEO is appointed, is designed to meet Compaq’s channel requirement through 2002, the company said. The effect of Compaq’s new strategy on the other 35 partners isn’t clear. Instead of stocking Compaq’s full line of products, Pinacor and the other 35 distributors will buy products from one of the four and pass them along to their resellers. Pinacor says it will continue to offer Compaq’s configure-to-order products. Pinacor parent MicroAge said it couldn’t yet tell what the financial impact of Compaq’s strategy would on Pinacor would be. MicroAge shares fell slightly on the news to reach $4.62, just above its 52-week low of $4.25.
